The Facts about Food: Teacher Companion Guide
Introduction
Welcome to Econ Essentials. This program is designed to help students learn
fundamental economic principles in an engaging, digital environment. With this
digital interactive, students will be challenged to advise a farm owner using the
information they learn throughout this program. Along the way, students will learn
about basic supply and demand, supply and demand within the food chain, and risk,
and how all of these factors affect the price of food.
While seat time for students will vary, the interactive is designed to take 30–35
minutes for students to complete.
This educator guide includes background information about the topics covered and
guidance on how to use the tools and assessments in a one-to-one or one-to-many
environment.
Overview
This module in the Econ Essentials program focuses on the price of food. It is
designed to be used as a self-paced module with interactive features that enhance
the experience for visual, auditory, and kinesthetic learners. The content is divided
into three topics:



Supply, Demand, and the Food at Your Table: An introduction to supply,
demand, and the relation both have to food prices
Supply and Demand along the Food Supply Chain: An introduction to how
supply and demand factor into the production of food at every point in the
food supply chain
Risks on the Ranch: An explanation of risk and how it affects food prices
Students can view the module using a web browser on a workstation, laptop, or
tablet. Content is presented as “screens” that students will navigate. Interactive
elements and graphics are included throughout. The text, videos, and graphics are
accompanied by audio narration that reinforces the content and supports learners
at different reading levels.
The last section is a simulation game in which students apply what they have
learned about food prices to make recommendations about production on a farm.
At the end of this interactive, students will complete a summative assessment that
includes a series of multiple-choice questions on the topics covered in the module.
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Instant Expert
The price of food and the factors that affect prices stand as great examples of the
global economy at work. The basic economic principles of supply and demand
operate as the prices of food commodities fluctuate over time. Students may be
aware that these fluctuations occur, but they may not know why or how these
fluctuations affect them and the economy in which they live.
This digital interactive will show students how the prices of different farmproduced food items are determined and how each point in the food supply chain
factors into price.
Section 1: Introduction and Scenario
In the setup, students will read a scenario that explains the following: Last summer,
they worked on a farm and learned a lot about the day-to-day operation of the farm,
but now they want to know how farms make money. Students will be introduced to
the concepts of risk, prices, and supply and demand.
Section 2: Supply, Demand, and the Food on Your Table
The first topic covers supply and demand. The price of a product is controlled
mainly by levels of supply and demand.
Supply is the quantity of a product available for sale. This can change according to
such factors as:
 The cost of goods needed to make the product (inputs)
 Technological improvements in the production of the product
 The expectations of the producer
 The number of suppliers
Demand is the level of need for a product by consumers. Demand can increase or
decrease according to such factors as:
 Changes in competition from substitute products
 Prices of complementary products
 Changes in consumer preferences
 Changes in consumer incomes
Graphs of supply and demand curves illustrate these relationships. Supply and
demand curves intersect to form a balance point called the equilibrium point. This
represents the optimal price, which is the highest price the producer can charge
without consumers losing interest in the product. Viewed another way, the optimal
price is the lowest price consumers will pay at a point where it is still profitable and
worthwhile for the producer to supply the product. When supply or demand
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changes, this shifts supply or demand curve left or right, causing a change in the
equilibrium point.
Section 3: Supply and Demand along the Food Chain
The second topic introduces the student to the food supply chain. Supply and
demand affect prices at every step in the supply chain. All the steps in the supply
chain combine to determine the final prices consumers pay.
Each step in the supply chain is a single part of the business of getting food from
farm to table. For example, farmers grow corn crops and harvest them for sale to a
grain elevator. Processors buy the corn from the grain elevator and transform it into
a product and package it for sale to consumers or feedlot operators. The processor
sells the product to a wholesaler, and grocery stores (retailers) buy the product
from the wholesaler. Each step in this supply chain incrementally increases prices
until the product is sold to consumers at the final market price.
Speculators are briefly introduced as part of the supply chain. Speculators invest on
organized futures exchanges, where they purchase futures contracts on
commodities and financial instruments. Speculators accept risk in order to make a
profit based on future price changes. Because risk can be transferred across buyers
and sellers, these organized exchanges have a stabilizing influence on prices.
This section concludes with an interactive that allows students to manipulate costs
at different stages of the beef supply chain to see how the final price consumers pay
for hamburger meat is affected by each change the students make.
Section 4: Risks on the Ranch
For any producer, there are many types of risks associated with making a product
and getting it to market. These risks ultimately contribute to the final price of the
product. For example, increased feed costs for cattle will increase a farmer's costs to
produce beef. This increase is passed along the supply chain, raising the price of
beef products for consumers at the grocery store.
Students will explore many examples of risks faced by farmers, including
unexpected expenditures, increased energy costs, increased competition, and higher
taxes. They see whether these risks and other factors cause prices to trend up or
down.
Section 5: Making Production Decisions
In the final section, students will apply what they have learned throughout the
lesson about supply and demand, the supply chain, and risk. Building on the original
scenario, they will be asked to advise a farm owner on how to expand production of
beef or corn based on external factors and risks. They can increase their scores
(profitability) by making smart decisions about production over five turns (years).
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At the end of this simulation, students will receive an overall score that shows how
effective their advice was. They can then repeat the game to try to get a higher score.
The Facts about Food
Getting Started
Objectives
Students will learn:
 The basics of supply and demand, including supply and demand curves and
equilibrium points
 How supply and demand apply to various stages in the production of food,
particularly on a farm or ranch
 How prices are affected by various factors at every point in the food supply
chain
 The role risk plays in food production and profit
 How to apply information about supply and demand, prices, the food chain,
and risk in order to manipulate profit margins for a farm owner in a
simulation
Materials
To help students navigate the interactive, you will need:
 A computer or other device with Internet access and a web browser
 A projection device to display the web pages
Procedure
This module is designed to be used by individual students in a self-paced setting or,
if technology is limited, in a one-to-many environment. If using the module as a
presentation in a one-to-many environment, the instructor can use the navigation
features of the module to present the content to students and to set the pace of the
lesson. By eliciting group responses, the instructor can facilitate interaction between
students about their experiences and ideas and initiate small group discussions.
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Topics
Section 1, Setup: From Farm to Table
Estimated time to complete: 3–5 minutes
Section 1 – Screen 1
In the first screen of the setup, students are introduced to the topics of the module:
food prices and how they are affected by supply and demand, the supply chain, and
risk.
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Section 1 – Screen 2
In the second screen of the setup, students are given the module scenario. Last
summer, they worked on a farm and learned a lot about the day-to-day operation of
the farm, but now they want to know how farms make money. To understand this,
they first need to learn about food prices and how they affect farmers' decision
making and profitability.
The food supply chain starts on the farm. A farm is in the business of producing and
selling food commodities. Examples of these commodities include corn, which is
used as feed for livestock as well as food for consumers, and cattle, which are used
to produce beef products for consumers.
One of the factors that contribute to food prices is the risk faced by the farmers and
ranchers who produce these commodities. These risks are discussed in more detail
in Section 4.
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Section 1 – Screens 3 and 4
Students watch a short video, Risk on the Ranch. The video tells the story of how a
steak got from the farm to the table. It presents the risks faced by ranchers and
feedlot operators in the supply chain for beef and how these risks affected the final
price of the steak. These risks include severe weather, rising feed costs, and threat of
disease. Other instances given as examples include regular ranch upkeep and
maintenance and escalating gas prices.
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Section 1 – Screen 5
The next screen shows an interactive of beef prices and corn prices over a long
period of time, with clickable points explaining what prices at various levels can
mean for producers.



High prices can mean the farmer who sells his cattle can make more money.
Low prices might mean the farmer will make less money selling his cattle.
Stable prices make the farmer's profits and costs easier to predict, whether
they are high or low.
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Section 1 – Screen 6
In the next screen, a simple line graph documents the rising and falling prices of beef
and corn over a period of several years. Students can see that corn prices start high
and rise, but then later go into steep decline; beef prices rise gradually in a
predictable way over the same period.
The role of prices in determining the farmer's profits has been made clear
throughout this section. The important question is, What determines those prices?
This is a complex question with a complex answer.
In order to understand what determines price and price changes, students must
start with economics and the principles of supply and demand.
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Section 2: Supply, Demand, and the Food on Your Table
Estimated time to complete: 4–6 minutes
Section 2 – Screen 1
Section 2 focuses on the economic concepts of supply and demand—defining them,
explaining how they are represented graphically by supply and demand curves, and
discussing how they interact to determine the price of a good.
The opening video uses a comic book as an example of a good whose price fluctuates
based on these factors. When there are not enough comic books to meet demand,
the price stays high. When supply increases and there is far more supply than
demand, the price goes down.
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Supply and demand are graphed abstractly on a
chart showing a good's price and the quantity of
the good that is bought and sold. The lines
representing supply and demand are called
curves even though they are often shown as
straight lines.
The supply curve shows how much of a good
suppliers are willing to produce at any given
price. It starts low on the left (low price, low
quantity supplied), and the quantity supplied
increases as the price increases.
The demand curve shows how much of a good
consumers are willing to purchase at any given
price. It starts high on the left (high price, low
quantity demanded), and the quantity demanded
increases as the price decreases.
The point where the supply and demand curves
meet is called the equilibrium point; this is the
price of the good.
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Section 2 – Screen 2
On the next screen, students learn about supply and demand curves and how they
determine an equilibrium point. The equilibrium point influences how prices are
set for products, goods, and services.
The equilibrium point is the point where the supply and demand curves cross in the
graph (example graph shown).
Equilibrium means balance. If suppliers set their price higher than the equilibrium
price, they will not sell as much of the product as they hope to. If they set their price
lower than the equilibrium price, they will not have enough supply to meet the
demand. The equilibrium point is the balance between what suppliers want to
charge for their product and what most people are willing to pay for it.
This screen changes to show changes in supply, demand, and the equilibrium point.
The movement of the supply and demand curves happens naturally in the real
world, and eventually settles into an equilibrium that determines the market price
of a good.
The equilibrium price is also called the market-clearing price. When a market
"clears," this is another way of saying the market is in equilibrium, and the supply of
a good equals demand for it.
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Section 2 – Screen 3
Prices move up or down based on changes in supply or demand (or both). When
either supply or demand changes, the curve moves to the right (for an increase) or
the left (for a decrease). The movement of either curve is called a shift.
First, students see what happens when the supply curve shifts. The supply curve
shifts to the right, representing an increase in supply. This causes the equilibrium
point to drop, reflecting a decreased price.
Conversely, a decrease in supply shifts the supply curve to the left. This raises the
equilibrium point, meaning the price has gone up. This introduces two key
principles of supply:


An increase in supply will cause prices to fall, all other things being equal.*
A decrease in supply will cause prices to rise, all other things being equal.
When using economic models like a supply and demand model, the other things equal assumption is an
important tool. This assumes that all relevant factors except the one under study remain unchanged; this allows
the modeler to analyze a single factor's effect on the economy in isolation.
*
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Section 2 – Screen 4
This interactive screen directs students to click on factors to learn how they can
affect supply—potentially both positively and negatively.
Factor
Price of Inputs
Technological Changes
Seasonal Projections of
Demand
Competition from Other
Suppliers
Supply Interruptions
Description
The price of an input can change. For instance, iron is
used to make steel for construction projects. If the price
of iron goes up, steel producers can’t buy as much with
the same amount of money. Less iron means producers
manufacture less steel.
Improved technology can make it cheaper to make the
product. If a new technology allows microchips to be
made more cheaply, the manufacturer can produce more
microchips without spending more money.
A producer may expect to need more of a product at
certain times. A candy manufacturer will produce more
chocolates on Valentine’s Day since he knows he can
sell more chocolates during this time.
The number of suppliers changes. The more suppliers
there are, the more supply there is to sell, and the lower
the price will be, if other factors remain equal.
Severe weather, natural disasters, and political conflicts
can reduce supply. After a volcano erupted in Iceland in
2010, several car manufacturers had to halt production
as they lost access to parts made in Europe normally
shipped by air.
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Section 2 – Screen 5
Now students explore how changes in demand affect prices. This screen shows how
changing demand will shift the demand curve.
The demand curve shifts to the left, representing a decrease in demand. This causes
the equilibrium point to drop, reflecting a price decrease.
Conversely, an increase in demand shifts the supply curve to the right. This raises
the equilibrium point, meaning the price has gone up. This introduces two key
principles of demand:


An increase in demand will cause prices to rise, all other things being equal.
A decrease in demand will cause prices to fall, all other things being equal.
Students are directed to click on different categories of factors that affect demand to
see why the demand curve might shift.
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Factors affecting demand and text are revealed upon clicking each factor.
Factor
Competition from
Substitutes
Complementary
Products
Changing Preferences
Reduced Incomes
Description
Substitutes are products that are similar enough to be
swapped with one another. If the price of one goes up,
people may choose to buy the other. Pork and chicken
prices affect the demand for beef because some consumers
will just choose whichever meat is cheaper. If pork is
cheaper than beef, consumers are likely to buy more pork,
sending demand for pork up and for beef down.
Complementary products are products that normally go
together. Changing the price of one can affect the demand
of the other. If the price of a movie ticket increases, fewer
customers will buy popcorn at the theater.
Consumers often change what they like—and the more they
like a product, the higher the demand. If a new scientific
study shows the benefits of eating red meat, demand for
beef will likely increase.
Consumers can only spend money they have, and a
widespread reduction in incomes means less money to
spend on consumption. High U.S. unemployment following
the recession of 2008–2009 reduced overall incomes and
lowered demand throughout the economy.
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Section 2 – Screen 6
This checkpoint asks students to predict how prices will move under different
scenarios. They should think about how each event would affect the supply or
demand for the beef used to make a hamburger and how this would affect the
hamburger’s price.
The checkpoint questions, answers, and feedback are on the next page.
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Below are the questions, answer options, correct answers, incorrect feedback, and
correct feedback for the self-check quiz.
Question: Determine how each event would affect supply and demand for beef.
Options for all questions:
A. Demand increases
B. Demand decreases
C. Supply increases
D. Supply decreases
Text on Tile
Correct
Answer
Incorrect Feedback
Correct Feedback
A new study was published
that shows previously
unknown health benefits from
eating lean ground beef.
A
B: Not quite. Although this would
affect demand, it would probably
increase demand.
C and D: Think again. This
would likely influence consumer
preferences, meaning it would
affect demand, not supply.
Correct! If new
scientific research
leads consumers
to develop a new
preference, this
will increase
demand.
Trade barriers with a
neighboring country are lifted,
allowing new imports of beef
from that country.
C
A and B: Think again—by itself,
this probably wouldn't affect
demand much. The raising or
lowering of trade barriers largely
affects supply for a product.
D: Almost—but lowered trade
barriers with a neighbor would, if
anything, increase the supply
of beef in your home country.
Correct! Lowering
trade barriers
between countries
typically increases
supply of goods
from those
countries.
A disease has spread among
livestock in the Midwest,
making it harder to reliably
produce high-quality ground
beef.
D
A and B: Incorrect. A factor like
disease influencing beef
production would affect the
supply.
C: Not quite. Disease would
indeed affect the supply—but
negatively.
Correct! A healthrelated event like
disease can
interrupt the
supply—therefore
lowering it.
The "Viking diet" is rapidly
gaining widespread popularity
among U.S. consumers—and
it doesn't include beef.
B
A: Almost. Although this would
affect consumer preferences,
and therefore demand, it would
likely cause demand to fall.
C and D: Incorrect. This wouldn't
affect production—it would affect
consumer choices, which means
demand.
Correct! Consumer
preferences can
shift away from a
product, which
would reduce
demand for it.
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Section 2 – Screen 7
Conclusion
Supply and demand for food commodities like corn and cattle are just the beginning.
Before prices are set at the grocery store for the consumer, every step along the
food supply chain also affects food prices.
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Section 3: Supply and Demand along the Food Chain
Estimated time to complete: 5–7 minutes
Section 3 – Screen 1
This first screen in Section 3 introduces the concept of the supply chain. There are
many steps between the initial production of a raw food commodity (like cattle) and
a finished consumer product (like ground beef), and each agent in the supply chain
performs very different tasks.
Because of this, it makes sense for each part of the supply chain to specialize in one
area of production. Each step in the supply chain is affected by supply, demand, and
prices.
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Section 3 – Screen 2
This interactive screen introduces students to a sample supply chain for consumer
products made from corn. Students are taken through each step of this simplified
supply chain: Farmer, Grain Elevator, Processor, Wholesaler, and Retailer.
Students go on a virtual tour to meet people in each part of the supply chain to learn
what they do and how they affect the price of corn.
The table below outlines the five-step supply chain for corn featured in the minislide tour.
Agent
Farmer
Grain Elevator
Description
The farmer is the initial producer of raw, unprocessed corn. He
plants corn crops beginning in April and continuing into June.
He begins harvesting in October and finishes in November. A
farmer usually sells bushels of harvested corn to a grain
elevator.
The grain elevator buys large quantities of corn from farmers
and combines and stores them together. The grain elevator
system is much more efficient than storing corn in individual
sacks. The grain elevator then distributes the corn, selling it to
different processors.
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Agent
Processor
Wholesaler
Retailer
Description
Processors specialize in transforming the raw material—
bushels of corn—into a finished product. Examples of cornbased products include canned corn, cornstarch, corn chips,
cereal, and even fuel in the form of ethanol. The processor
produces her product, packages it, and sells it at a profit to a
wholesaler.
The wholesaler is a distributor who specializes in the business
of getting the finished product to the markets where consumers
demand them. Sometimes there are multiple levels to this part
of the supply chain, especially when goods are sold across state
and international borders.
The retailer, such as a neighborhood grocery store, is the final
step in the supply chain. The retailer makes the finished
product available to the consumer to purchase.
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Section 3 – Screen 3
On this screen, the role of speculators in the supply chain is explained at a high level.
The speculation process helps keep prices relatively stable. Matching each buyer
with a seller helps commodities markets function more efficiently.
Sidebar: More on Speculators
Speculators typically participate in organized futures markets. In these markets,
standardized contracts are traded, and measures are put in place to ensure
speculators do not have to worry about counterparty risk. In other words, the risk
of not finding a reliable buyer for a commodity or financial instrument is reduced or
eliminated. Speculators use complex economic calculations and market forecasts to
make trading decisions. They do not usually participate in the supply chain for the
physical commodity. They usually participate in the price discovery and risk
management processes on organized futures exchanges.
The trading activity of speculators anticipates and warns others about shortages or
surpluses in the market. This helps others prepare for these events and sets
expectations for future market conditions, which results in a less volatile market
and more stable prices.
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Brokers and Liquidity
Brokers work with the speculators who want to accept market risk in an attempt to
profit by buying and selling commodities like corn. This trading typically takes place
on a futures exchange. Brokers can help various participants in the marketplace or
the supply chain buy or sell commodities like corn in an effort to profit from future
changes in prices.
Brokers and speculators play an essential role in maintaining effective markets.
Their participation in the markets means it is easier for others to buy and sell when
they want to, a concept called liquidity.
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Section 3 – Screen 4
This screen contains a complex interactive based on a simplified supply chain for
ground beef. The interactive presents a basic summary of the input price, markup,
and output price for each agent in the chain to show how the price for beef begins
low at the farm and continues to increase as it moves through the supply chain.
Students are able to manipulate the markup each agent adds to his or her price in
order to see how this change affects the retail price for ground beef. The normal
retail price for ground beef is around $4.29 per pound. By manipulating different
agents' markups, and therefore their output prices, students can see prices rise or
fall substantially from the typical retail price. This shows the significant effect each
step in the supply chain can have on retail prices.
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Below is the outline of the math that underlies the setting of prices in the supply
chain. Note: These figures are simplified averages based on recent average ground
beef retail prices as well as commodity prices along the supply chain (such as feeder
steer, live beef steer, and so forth). These prices fluctuate daily. As an exercise,
encourage students to research current prices at various points along the supply
chain and think about reasons why prices may have risen or fallen relative to those
presented here.
Red text indicates numbers that are changeable based on student inputs.
Agent
Farmer
Feedlot
Description
The farmer (or
rancher) breeds and
raises cattle until they
are about a year old.
A feedlot continues to
feed and raise the
cattle for 4–6 months
before sending them
to a processing
facility.
Processor The processor
harvests the cattle,
and then it produces
and packages ground
beef and other
products.
Wholesaler The wholesaler is a
distributor who sells
and ships packaged
ground beef to
retailers (like grocery
stores).
Retailer
The retailer sells the
finished ground beef
to consumers at local
grocery stores.
Text for Pop-Up
Farmer’s Price Breakdown:
1. Input cost for 1 lb. of ground beef =
$1.45
2. Markup = 10%
3. Output price = $1.60 (1.41 x 1.10 =
$1.60)
Feedlot’s Price Breakdown:
1. Input cost = $1.60
2. Markup = 30%
3. Output price = $2.07 ($1.60 x 1.30 =
2.07)
Processor’s Price Breakdown
1. Input cost = $2.07
2. Markup = 11%
3. Output price = $2.30 ($2.07 x 1.11 =
$2.30)
Wholesaler's Price Breakdown
1. Input cost = $2.30
2. Markup = 35%
3. Output price = $3.11 ($2.30 x 1.35 =
$3.11)
Retailer’s Price Breakdown
1. Input cost = $3.11
2. Markup = 35%
3. Output price = $4.19 ($3.11 x 1.35 =
$4.19)
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Section 3 – Screen 5
Conclusion
This last screen of Section 3 concludes the supply chain and transitions into a third
factor students will need to consider as they learn about food prices—risk.
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Section 4: Risks on the Ranch
Estimated time to complete: 4–6 minutes
In this first screen of Section 4, students read a scenario about potential risks
involved in operating a farm. In the scenario, a new state law has introduced stricter
physical requirements for farm buildings used to house cattle. This means that the
owner of the farm the student has worked for in the past must make expensive
upgrades to comply with the law.
Upgrading is good in the long run, but this unexpected event will increase the
owner’s production costs for this year. As a result, he must choose between raising
his prices and reducing his profit margins.
This is an opportunity to ask students some questions about the economics of food
prices:


What are some potential effects of increasing cattle prices?
o Beef prices might increase in the marketplace.
o The farmer's customers may go elsewhere to seek cheaper cattle.
o The farmer might decide it is not worthwhile to produce cattle and
may cut production.
What are some potential effects of reducing profit margins on cattle?
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o The farmer may not be able to keep the business running if profits
decline too much.
o The farmer may have to delay further investment in or expansion of
his business.
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Section 4 – Screens 2 and 3
Students begin an interactive presentation showing basic examples of risk
categories and specific examples of risks faced by farmers.
The following are the risks and other scenarios that are included in the
presentation:





Weather events: Severe winter weather delays the planting season by
several weeks. This reduces the amount the farmer can produce and cuts into
profits.
Changes in supply: Last year’s grain production resulted in unusually high
grain stocks left over in the market this year. This increase in supply means
prices fall, and the farmer will make less money.
Changes in input costs: An improving economy means increased hourly
labor costs for the farm’s staff, which cuts into the farmer’s profits.
Changes in competition: Increased grain produced abroad means more
competition in the marketplace. Prices could fall, which would reduce the
farmer’s profit.
Energy price changes: If fuel and energy prices go up, it becomes more
expensive to operate farm vehicles and equipment. These higher costs eat
away at profits.
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Section 4 – Screen 3
Students learn that just like the many steps in the supply chain, all of the risks faced
by a farmer contribute to the retail price of the finished product. In a brief activity,
students are introduced to several categories of risks and other factors that affect
costs and prices.
Then, students can click the “Make Prices Move” button to see a random set of risks
and other factors. Taken together, these factors may ultimately cause prices to rise
or fall. Below are the possible results.
Item
Weather
Government
Policies
Changed
Preferences
Decreased
Competition
Description
Summer flooding across the Midwest
decreases corn production.
To protect U.S. corn production, the
government pays farmers subsidies to
support their businesses.
Several new diets that exclude corn
products are growing in popularity.
Food exports from Central Asia are
sharply reduced, decreasing
competition in the United States.
Effect on Prices
Prices trend up
Prices trend up
Prices trend down
Prices trend up
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Item
Disease
Limited Farmland
Changing
Technology
Energy Costs
Taxes
Description
Disease affects this year’s corn crop,
and supply for corn hits an all-time
low.
New farmland is becoming
increasingly scarce, making it harder
for supply to keep up with demand.
A new, safer pesticide has been
developed that protects crops from
parasites and disease.
Falling oil prices reduce the costs of
bringing food to market; these savings
are passed to consumers.
The government lowers taxes on corn
products, and the tax savings are
passed on to consumers.
Effect on Prices
Prices trend up
Prices trend up
Prices trend down
Prices trend down
Prices trend down
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Section 4 – Screen 4
Students answer several multiple-choice questions about risk on the ranch. They
must decide whether the risks and other factors in the quiz will increase prices or
decrease prices. Students are reminded to consider the basics of supply and
demand.
Below are the scenarios, correct answers, and incorrect feedback for each question.
Question: Determine how each event or risk would affect the price of the product in
question.
Options for all questions: A. Prices go up B. Prices fall
Scenario
Correct
Answer
Incorrect Feedback
Correct Feedback
A recession has reduced
incomes, causing many
people to cut back on
beef purchases.
B
Not quite. Reduced
incomes lead to reduced
demand, which can cause
beef prices to trend
Correct! Reduced
incomes lead to reduced
demand, causing beef
prices to trend down.
33
Scenario
Correct
Answer
Incorrect Feedback
Correct Feedback
down.
Fuel prices drop. You
use fuel to power much
of your farm equipment.
B
Incorrect. Fuel is an
input; a lowered input
cost will make you more
efficient, leading to lower
prices.
Correct! A lowered input
cost will make you more
efficient, leading to lower
prices.
Your state passes a new
tax on beef sales.
A
Not quite. A tax is passed
along to consumers,
meaning the price goes
up.
Correct! Raising taxes
will generally increase
the price of goods.
You purchase new
equipment that makes
corn harvesting more
efficient.
B
Incorrect. New
technology making
production more
efficient will cause prices
to trend down.
Correct! A new
technology making
production more
efficient will cause prices
to trend down.
A breakdown in the local A
irrigation system has
made it much harder for
you to get water to your
crops.
Incorrect. A breakdown
in infrastructure will
disrupt supply, likely
leading to higher prices.
Correct! Infrastructure
failures often lead to
disrupted supply and
higher prices.
The Environmental
Protection Agency
recently banned the
pesticide you normally
use on your crops. You’ll
have to use a less
effective one.
A
Incorrect. Environmental
policy can affect prices;
banning a potentially
pollutant pesticide could
make production harder,
raising prices.
Correct! Environmental
policy to prevent
pollution can make
production harder,
raising prices.
A drought greatly
reduced the corn
harvest this year.
A
Not quite. Severe
weather can reduce
supply, which would
cause prices to trend up.
Correct! Severe weather
can reduce supply,
causing prices to trend
up.
More farmers are
planting corn than ever
before.
B
Not quite. An increased
number of suppliers
increases competition
and causes prices to
trend down.
Correct! An increased
number of suppliers
would increase supply,
thereby lowering prices.
Feedback type: Instant feedback. When the user clicks an answer, they will see feedback
immediately.
34
Scenario
Correct
Answer
Incorrect Feedback
Correct Feedback
Results screen: You got X correct out of Y. Would you like to try again or continue?
35
Section 4 – Screen 5
Conclusion
Students are told that the farmer they used to work for has asked them to come back
and use their new knowledge of several concepts to help him make plans for the
future of the farm in the following areas:




Food prices
Supply and demand
Supply chain
Risk
36
Section 5: Making Production Decisions
Estimated time to complete: 4–5 minutes†
Section 5 – Screen 1
Section 5 is a repeatable simulation game. The student has been asked back to the
farm to advise the farmer on making production decisions based on events in the
world that might affect food prices and the farm's profitability. Students will advise
the farmer on how to best expand his production—into corn or beef—by up to 10%
each year over the next five years (turns).
During each turn, students are presented with a scenario (randomly selected from a
pool) related to supply and/or demand of beef or corn (or both). They must then
choose how much to invest in production capacity of these two commodities in
order to take advantage of rising or falling prices in one or the other. At the end of
each turn, they can see how their decision plays out in the marketplace over a
period of one year, as the value of the business will go up or down. A turn consists of
three parts:
Students are encouraged to repeat the simulation to get a better score; each repetition after the first
attempt is estimated to take 3–4 minutes.
†
37
Part 1: Scenario screen: Students read a scenario and consider how the scenario
affects the supply, demand, and price of corn and/or beef.
Part 2: Decision screen: The students choose how much to invest in production of
each commodity, up to a total of 10% across both products. Investing in a
commodity with rising prices will generally yield the most profit to their business;
investing in a commodity with a falling price will yield less profit.
Part 3: Results screen: The students see their profits after that year, with a new
total dollar value for their corn and beef that changed based on (a) changing prices
and (b) the production decisions they made in Part 2.
Students repeat these steps a total of five times (five turns). Because the scenarios
are randomly selected from a larger pool, every repeat of the simulation will present
different scenarios, and students can get very different scores each time.
38
Section 5 – Screen 2
Simulation: Each turn, students will get a random 1 of the situations below. Each scenario has
an effect on beef prices, corn prices, or both, as shown in the modifier columns. Students can
increase production of one or the other line of business by up to 10% (in increments of 1% if
they choose to split production growth). Each turn their base score is re-calculated based on the
new prices.
Corn Feedback
Beef Feedback
(if student expands (if student expands
Corn
Beef
corn production by beef production by
Scenario
Modifier Modifier >5%)
>5%)
A new
+10%
None
Good thinking. This
Beef prices stayed
government
government
stable this year, so
regulation is
regulation reduced
you didn’t make
going into effect
the supply of corn
much extra from
that will
available for food
expanding that
increase the
production—
production.
amount of U.S.
meaning the price
Meanwhile, corn
corn production
went up. It was right prices went up, so
that must go to
to expand the
the farm may have
ethanol
farm’s corn
been better off
production from
production to take
expanding corn
40% to 45%.
advantage of rising
production.
prices.
The Brazilian
None
–12%
The farm had a good It wasn’t a great year.
39
Corn
Scenario
Modifier
currency, the
real, is very
weak against the
U.S. dollar now.
This has caused
Brazilian chicken
exports to the
U.S. to become
much cheaper.
Beef
Modifier
The “Paleo” diet
is all the rage in
America. Paleo
dieters eat more
meat, including
beef.
+3%
+10%
Political unrest
in Ukraine,
normally one of
the world’s
leading corn
exporters, has
disrupted
supplies of corn
in that country.
+8%
None
A drought in the
Midwestern U.S.
has greatly
reduced crop
yields of many
crops.
+10%
None
Corn Feedback
(if student expands
corn production by
>5%)
year. Brazilian
chicken is a
substitute for
American beef
among consumers.
Demand fell for beef
as this cheap
substitute became
available, lowering
the prices the
farmer could get for
beef. Expanding into
corn was a wise
choice.
This year was a
decent one for corn.
Increased demand
for beef actually
caused corn prices
to rise slightly.
However, beef
prices rose even
more—the farmer
would have made
more expanding
beef production.
The farm had a
profitable year.
Reduced supply of
corn from Ukraine
meant rising prices
back home, so the
farmer did the right
thing by expanding
into corn
production.
Nice job. The farm
made good money
this year by
expanding its corn
production while
supply dwindled
Beef Feedback
(if student expands
beef production by
>5%)
Brazilian chicken is a
substitute for
American beef
among consumers.
Demand fell for beef
as this cheap
substitute became
available, lowering
the prices the farmer
could get for beef.
Expanding into corn
might have been
better.
This was a pretty
good year. The
farmer did the right
thing expanding into
beef as demand was
going up
substantially, while
prices for corn rose
only slightly.
This year wasn’t too
bad, but the farmer
missed an
opportunity to take
advantage of rising
corn prices because
of reduced supply
from Ukraine. The
farmer might be able
to do better next
year.
The farm did all right
this year; beef prices
stayed steady, but
the farmer might
have done better to
expand corn
40
Corn Feedback
(if student expands
corn production by
>5%)
elsewhere.
Corn
Modifier
Beef
Modifier
A new tax on
beef products in
your state has
made it more
expensive to get
your goods to
market.
None
–5%
The farmer had a
decent year. Corn
prices were stable
and beef prices
went down. Your
advice to expand
corn production was
wise.
New
environmental
regulations have
banned the use
of a pesticide,
making it more
difficult for all
farmers to
produce quality
yields. Luckily,
you never used
this pesticide in
the first place.
A recent mad
cow disease
scare has caused
many
consumers to
avoid eating
beef for some
time.
+15%
None
The farm had a
great year! The
banning of the
pesticide reduced
supply from the
farm’s competitors,
causing prices to
trend up. You took
advantage wisely by
advising expansion
of corn production.
None
–20%
A new national
advertising
campaign
promoting beef
as “The AllAmerican Meat”
is increasing
consumer
None
+10%
The farmer had a
pretty good year—it
was wise to expand
corn production,
since its prices
remained stable.
The farm would
have lost money by
expanding further
into beef.
This year was okay.
Corn prices were
stable, but the farm
probably could have
made more by
expanding into beef
as demand and
prices rose.
Scenario
Beef Feedback
(if student expands
beef production by
>5%)
production and take
advantage of rising
corn prices.
It was not a great
year. Demand for
beef took a hit
because of the new
tax, so the farm
didn’t make as much
money by expanding
into beef as you had
hoped.
The farm had a
decent year. Beef
prices stayed stable,
but you realize now
that the farmer could
have made more
money by expanding
corn production
because of rising
corn prices.
It was a very tough
year. Beef prices
plummeted because
of the disease scare,
causing demand and
prices to fall
significantly. Corn
would have been a
safer bet.
Nice job. Beef
demand and prices
rose steadily thanks
to this new
advertising
campaign. It was
smart to expand beef
production.
41
Corn
Modifier
Beef
Modifier
–10%
None
Several nearby
farms have
switched
production away
from corn
completely and
are focusing
exclusively on
beef.
+10%
–10%
Some
consumers are
growing
suspicious of
genetically
modified crops
and are staying
clear of corn
products from
all producers.
The U.S.
government has
halted all
agricultural
imports from
several Middle
Eastern
countries
because of
tensions in the
region.
–20%
None
+10%
+10%
Scenario
interest in beef.
A newly
developed,
hardier strain of
corn has greatly
increased yields
by competing
farmers in
California.
Corn Feedback
(if student expands
corn production by
>5%)
Beef Feedback
(if student expands
beef production by
>5%)
This was a tough
year for corn
production. Corn
prices fell because
of greatly increased
supply nationwide,
and the farm lost
money on its corn
production
compared with last
year.
The farm had a good
year because it
expanded its corn
production. A
decrease in
competition
reduced supply for
corn, raising prices
and increasing the
farm’s profits.
This was an awful
year to expand corn
production.
Changing consumer
preferences led to
reduced demand
and much lower
prices.
You gave good advice
this year. Beef prices
stayed strong as corn
prices steadily fell
because of increased
supply throughout
the market. This
helped the farm’s
profits stay stable.
The farm had a
great year! Beef and
corn prices both
trended upward, so
the farmer really
couldn’t go wrong
by expanding
production of
either.
The farm had a great
year! Beef and corn
prices both trended
upward, so the
farmer really couldn’t
go wrong by
expanding
production of either.
This was a bad year
to expand production
of beef. There was a
big increase in
competition, which
increased supply and
lowered prices.
You wisely chose to
expand beef
production this year.
Demand for corn fell,
while beef prices
remained strong,
protecting your
profits.
42
Section 5 – Conclusion
The final screen shows the student’s results after a five-year period. The farm has
grown (or shrunk) based on the student’s advice. The final score is shown on this
screen alongside a detailed breakdown of the student’s progress throughout the
simulation, including the gradually increasing/decreasing prices of corn and beef
and the student’s total value in each commodity in each year. The student is given
the option to play again or proceed to the post-assessment.
43
Appendix A: Glossary Terms and Definitions
Term
commodity
profitability
market price
supply
demand
equilibrium point
input
risk
broker
speculator
liquidity
futures
futures exchange
subsidy
financial instrument
Definition
A standardized product viewed by consumers as the
same, such as corn or cattle.
A business’s profits are equal to the money it takes in—
its revenues—minus the money it spends—its costs. If
you take in more than you spend, you make a profit.
The price of a finished good that is sold in the market to a
consumer.
The amount of a product that is produced and made
available to consumers at a given price.
The amount of a product that consumers want to buy at a
given price.
The point at which the demand curve and supply curve
intersect; this determines the price of a product.
A good used to create another good.
Uncertainty about future outcomes.
A person who works with various participants in a
market who want to manage risk or even accept risk to
earn a profit.
An investor who is willing to accept risk in order to profit
from future changes in prices.
A high volume of activity in a market, usually resulting in
increased efficiency and stabilized prices.
Contractual agreements to buy or sell an amount of a
commodity or financial instrument at a fixed price at a
future date.
An organized exchange on which various market
participants buy and sell standardized futures contracts.
Money paid by the government to an industry to help
offset costs and keep a commodity's price low or more
competitive.
Any type of asset that can be traded, including cash,
stocks, or bonds. The rights to ownership of something
else—commodities like corn, or even another financial
instrument—are tradable assets.
44
Educational Standards
This module aligns with the Voluntary National Content Standards in Economics
(2nd edition), developed by the Council for Economic Education. Specific 12th grade
standards and benchmarks covered by this module include the following:
Specialization
 Standard 4: The goods or services that an individual, region, or nation can
produce at lowest opportunity cost depend on many factors (which may vary
over time), including available resources, technology, and political and
economic institutions.
Markets and Prices
 Standard 1: Market outcomes depend on the resources available to buyers
and sellers, and on government policies.
 Standard 2: A shortage occurs when buyers want to purchase more than
producers want to sell at the prevailing price.
 Standard 3: A surplus occurs when producers want to sell more than buyers
want to purchase at the prevailing price.
 Standard 4: In a market economy, shortages of a product usually result in
price increases; surpluses usually result in price decreases.
Role of Prices
 Standard 1: Demand for a product changes when there is a change in
consumers’ incomes, consumer preferences, the prices of related products, or
the number of consumers in a market.
 Standard 2: Supply of a product changes when there are changes in the prices
of the productive resources used to make the product, the technology used to
make the product, the profit opportunities available to producers from
selling other products, or the number of sellers in a market.
 Standard 3: Changes in supply or demand cause relative processes to change;
in turn, buyers and sellers adjust their purchase and sales decisions.
Trade
 Standard 2: When imports are restricted by public policies, consumers pay
higher prices and job opportunities and profits in exporting firms may
decrease.
Decision Making

Standard 6: Some decisions involve taking risks in that either the benefits or
the costs could be uncertain. Risk taking carries a cost. When risk is present,
the costs should be treated as higher than when risk is not present.
45
Additional Resources
Fueling the Future
The price of fuel is often a factor that must be considered when a business sets
prices for products and services. But how are fuel prices set? In this simulation,
students must predict future gas prices to help an imaginary business turn a profit.
But first they must learn how and why gas prices fluctuate and the impact of those
changing gas prices.
Futures Fundamentals
Take your economics understanding to the next level with Futures Fundamentals,
the program that brought you Econ Essentials. Explore investing concepts like
futures, hedging, and speculating and discover how each plays an essential role in
the world around us. Learn through interactive elements including videos, quizzes, a
game, and a large collection of easy-to-understand infographics.
The Facts behind Food Prices
What risks and other factors influence food prices? Explore these infographics to see
a variety of examples of market conditions, external events, and economic forces
contribute to the price of beef and corn.


The Facts behind Food Prices
The Facts behind Beef Prices
Economics in Action: Experiential Activities for Students
Pork Belly Prices Sizzle
Read this article from August 2015 about recent changes in the price of pork bellies,
an increasingly popular commodity in the United States. Then respond to the
following questions in a paragraph of 3–5 sentences.
1. What is driving price changes for pork bellies—supply or demand?
2. According to the article, what is the relationship between bacon prices and
prices for a substitute good, beef? How do they affect each other?
3. While pork belly prices have increased, they are only one pork product sold
to consumers. What has happened to prices of pork in general?
4. What is expected to happen to demand for bacon in the coming months, and
what does this mean for ranchers who supply pork-bellies?
46
Short-Answer Research Questions
Take a few minutes to do some web research to find two examples of commodities
of food production other than those discussed in this module (beef and corn). For
each commodity you found, answer each of the following questions in a paragraph
of at least 3–5 sentences:
1. What finished food products use this commodity as an input to production?
2. What are the steps in the supply chain for this commodity before it gets sold
to consumers?
3. Have prices for this commodity been volatile or relatively stable in recent
years?
4. What factors could explain any recent price changes for the commodity?
5. What do you think will happen to prices for this commodity in the next few
months? Why?
47